Essel Mining & Industries Ltd. Vs DCIT (ITAT Kolkata)
From the perusal of the balance sheet of the assessee it was found that assessee was having sufficient own funds at its disposal for the purpose of making investments and accordingly it could be held that no borrowed funds were utilized for making investments. Hence, there could not be any disallowance of interest under second limb of rule 8D(2) of the rules read with section 14A of Income Tax Act, 1961.
FULL TEXT OF THE ITAT JUDGMENT
1. This appeal was earlier disposed off by this tribunal in ITA No. 786 & 2073/Kol/2013 (cross appeals) for the Asst Year 2008-09 vide order dated 10.3.2017. Later a Miscellaneous Application was preferred by the assessee in M.A.No. 108/Kol/2017 for non-consideration of the tribunal decision passed in assessee’s own case with regard to the issue of disallowance u/s 14A of the Act. This Miscellaneous Application of the assessee was disposed off by this tribunal in M.A.No. 108/Kol/2017 dated 10.11.2017 by holding as under:-
1. In view of the above we hold that the mistake apparent from the record has occurred in the order passed by this Hon’ble ITAT in pursuance to the provisions of section 254(2) of the Act. We therefore recall the impugned order for the limited purpose of adjudication of the disallowance made by the AO under section 14A of the Act. Accordingly the registry is directed to fix the case for hearing in due course of time. Hence the ground filed by the assessee in Miscellaneous Application is allowed.
2. Accordingly, this appeal was refixed for this limited purpose of adjudication on the issue of disallowance u/s 14A of the Act and was heard on 26.4.2018.
3. The brief facts of the issue of disallowance u/s 14A of the Act are that the assessee is a limited company engaged in the manufacturing business of rising of ore, manufacturing of nitrogen gas and ferro alloys, trading of iron ore and ferro alloys, generation of electricity (wind mill) and railway siding for captive use. The assessee in the year under consideration earned dividend income of Rs 7.10 crores which was claimed as exempt u/s 10(34) of the Act. The ld AO questioned the assessee for invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. The assessee replied as under:-
a) There was no direct expenditure incurred in earning the aforesaid dividend income as the dividend was received in the bank directly.
b) There was no borrowed fund used in making the investment therefore the question of interest disallowance does not arise.
c) The assessee for the administrative expenses has made the disallowance of Rs 5.97 lacs and submitted the details of the same in separate annexure and stated that 4 persons salary has been allocated to this.
However, the ld AO rejected the contention of the assessee by observing that the law does not make any distinction for the disallowance u/s 14A of the Act in a case where the dividend was credited to the bank directly. Accordingly the ld AO invoked the provisions of Rule 8D and worked the disallowance as under:-
